The third British Empire

The Cayman Islands, a British territory in the Caribbean, is a popular tax haven [GALLO/GETTY]

London, United Kingdom - Historians tell us that there were two quite distinct British empires - the first an Atlantic empire built on North American colonies and Caribbean possessions and the second an Asian empire, built on control of India and coercive trade with China. These two empires were deeply criminal projects, in the specific sense that they relied heavily on profits from slavery and the sale of narcotics. Empire on the British model was a moneymaking venture, where moral considerations took second place to the lure of super profits.

"Having given up the appearance of empire, the British have sought to reclaim its substance."

The first British Empire came to an end when the Americans fought a revolutionary war for independence in the 1770s. The second British Empire began to fall apart with Indian independence in 1947. Arab and African nationalism progressively undermined British influence in the years that followed. At some point, perhaps with defeat in Suez in 1956, or when Britain withdrew from its last significant overseas possession, Hong Kong, in 1997, the game was finally up.

Nowadays, if you believe what you're told by respectable historians and broadcasters, Britain has turned its back on its imperial past and is trying as best it can to make its way as an ordinary nation. The reality is somewhat more complicated. One day, perhaps history will describe a third British Empire, organised around the country's offshore financial infrastructure and its substantial diplomatic, intelligence and communications resources. Having given up the appearance of empire, the British have sought to reclaim its substance.

Banking on billionaries

Two news stories from last week help us sketch the outlines of this third, offshore empire. On Tuesday, March 20, a Russian banker was shot and seriously wounded outside his flat in Canary Wharf. On Sunday, March 25, the co-treasurer of the Conservative Party resigned after the Sunday Times claimed that he had been soliciting donations to his party from what he thought was a wealth fund based in Liechtenstein. These two apparently unrelated events together tell us quite a lot about contemporary Britain.

The United Kingdom allows foreign residents to hold their funds offshore and only taxes them on money they bring into the country. This approach, a relic from the days of openly declared empire, makes the country a popular place of residence for billionaires from all over the world, from Africa, mainland Europe and India.

Once in London, a sophisticated legal and financial apparatus arranges for foreign funds to be deposited in a network of offshore jurisdictions. In his groundbreaking book, Treasure Islands, Nicholas Shaxson describes London as the centre of a spider web that links to the Channel Islands, the Isle of Man and the Caribbean. With impressive frugality, the British have reinvented the scattered remnants of formal empire as instruments for serving the needs of global capital.

When the Soviet Union broke up, those who secured control of the privatised Russian economy flocked to London. They had little in the way of a social base in their own country and their position was chronically insecure. They needed a way to channel profits overseas, and London offered them access to a world-class financial centre and favourable tax rates.

The city also gave some of them a public profile outside Russia. In buying Chelsea Football Club and the Evening Standard, Roman Abramovich and Alexander Lebedev respectively have made themselves international figures. Moves against them by opponents back home are thereby made that much more difficult.

The British state does more than provide a hospitable, low-tax jurisdiction and the means to acquire a higher profile abroad. It puts its diplomatic resources at the disposal of favoured foreign residents.

For example, in July 2001, Tony Blair wrote a letter to Romanian Prime Minister Adrian Nastase to support Lakshmi Mittal's efforts to buy up the state-owned steel company, Sidex. Though Mittal had offices in London, the company making the bid was registered offshore, in the Dutch Antilles. But while Mittal did not employ many people in Britain, or pay much tax there, he did make a significant contribution to the Labour Party.

In May 2001, two months before Blair wrote his letter, the Indian magnate had given them £125,000 ($199,750). It is hardly surprising that Peter Cruddas was happy to talk with financiers from Liechtenstein about donations to the Conservative Party. Donations from foreigners are illegal, but it is a relatively simple matter to set up a company registered in the UK to handle the transaction. Offshore blurs the distinction between domestic and foreign.

Capital of capitalism

All this is part of a much larger imperial project, whose full scale and significance is difficult to appreciate. This is not an empire that advertises itself widely. Indeed, it tries to hide the very fact of its existence. But there is no doubting the ambition. For decades now, Britain's rulers have sought to make London the capital of global capitalism.

"The third British empire is not an industrial or military superpower. Indeed, it is intensely vulnerable."

The state has reorganised itself to this end. Privatisation was tested in the UK and then exported around the world. Deregulation brought foreign banks to London. The financial sector, the intelligence establishment and the political parties are committed to a project that the major media can scarcely bring themselves to discuss. Elections become ever more hallucinatory exercises, in which shallow differences in tone and detail obscure a far deeper complicity.

Occasionally, the dynamics of the offshore empire become visible as scandals or sensational crimes. Power struggles cause ripples that can't be missed. A foreign businessman is shot in the street. The sheer strangeness jolts us for a moment out of our obliviousness. A politician is caught soliciting donations and resigns.

Rupert Murdoch, a significant figure in Britain's revived imperialism, owns the Sunday Times, the paper that broke the Peter Cruddas story. One faction in the empire is sending a message to another. For a moment what cannot be discussed is mentioned, obliquely, as is the way of empire.

The third British Empire is not an industrial or military superpower. Indeed, it is intensely vulnerable. The United States and the great powers of Europe could do a great deal to hamper it, if they chose to do so.

The empire is a standing temptation to betray the local or the national for the sake of membership of a far more exclusive and elusive entity - an entity whose allure is intimately linked to its tact, its capacity to avoid straightforward description. Empire prospers to the extent that it can exploit, and where possible foster, corruption elsewhere.

Much of the old bombast is gone. There are fewer flags and trumpets. But in other respects, the third empire closely resembles its predecessors. Like them, it must do all it can to prevent effective democracy from breaking out at home, as it profits from tyranny abroad.

The dedication to the needs of global capitalism benefits only a tiny minority of the population. The rest face a future of steepening inequality and shrinking prospects. Besides, as in previous centuries the people at home must pay up when adventures abroad turn expensive.

And like the first two British empires, the current one is a criminal enterprise. But having specialised in slavery and drug trafficking, perhaps the empire's current, signature crime is tax evasion.

Dan Hind is a journalist and publisher. He is the author of The Threat to Reason and The Return of the Public. His new ebook on the Occupy movement and deliberative politics, Common Sense: Occupation, Assembly and the Future of Liberty, was published online on March 20.